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The first round of China tariffs already stifled U.S. exports

libadmin May 16, 2019
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May 16 at 12:57 PM

President Trump’s trade war with China escalated this week, as China announced tariff increases on over $60 billion worth of goods in retaliation for new U.S. tariffs. But the targeted American industries are already reeling from the trade skirmishes that heated up last summer.

Over a six-month period ending in March, exports from the United States to China dropped by $18.4 billion, or 26 percent, compared to a year earlier. Some of the decline was offset by other markets, with exports increasing to the European Union and Mexico. Imports from China declined as well.

Before

tariffs

After

tariffs

Before

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After

tariffs

Before

tariffs

After

tariffs

Before

tariffs

After

tariffs

Before

tariffs

After

tariffs

The decline reflected lost sales by a host of producers, from farmers and fishers to carmakers and oil companies, and in many cases marked an end to years of growing sales. These patterns reflected how China targeted its first round of higher tariffs at producers in manufacturing and farm states that were key supporters of Trump’s 2016 election, including Michigan, Wisconsin, Ohio, Iowa, North Carolina and Texas.

Large industries hit hard by first

wave of Chinese tariffs

Exports to China for Oct. 2017 to Mar. 2018,

prior to tariffs and Oct. 2018 to Mar. 2019,

after tariffs were implemented, for

industries with over $1 billion in exports

that had the greatest declines

Exports to China for Oct. 2017 to Mar. 2018, prior to tariffs and Oct. 2018 to Mar. 2019, after tariffs were implemented, for industries with over $1 billion in exports that had the greatest declines

Before tariffs

After tariffs

Soybeans

$9.1B

Fossil fuels

$6.5B

Vehicles

$5.9B

Wood

$1.7B

Copper

$1.1B

Large industries hit hard by first wave of Chinese tariffs

Exports to China for Oct. 2017 to Mar. 2018, prior to tariffs and Oct. 2018 to Mar. 2019, after tariffs were implemented, for industries with over $1 billion in exports that had the greatest declines

After tariffs

Before tariffs

Soybeans $9.1B

Fossil fuels $6.5B

Vehicles $5.9B

$4.1B Vehicles

$1.8B Soybeans

Wood $1.7B

$1.4B Fossil fuels

Copper $1.1B

$1.0B Wood

$0.6B Copper

Large industries hit hard by first wave of

Chinese tariffs

Exports to China for Oct. 2017 to Mar. 2018, prior to tariffs and Oct. 2018 to Mar. 2019, after tariffs were implemented, for industries with over $1 billion in exports that had the greatest declines

After tariffs

Before tariffs

Soybeans $9.1B

Fossil fuels $6.5B

Vehicles $5.9B

Wood $1.7B

Copper $1.1B

Large industries hit hard by

first wave of Chinese tariffs

Exports to China for Oct. 2017 to Mar. 2018,

prior to tariffs and Oct. 2018 to Mar. 2019,

after tariffs were implemented, for

industries with over $1 billion in exports

that had the greatest declines

Before tariffs

After tariffs

Soybeans

$9.1B

Fossil

fuels

$6.5B

Vehicles

$5.9B

Wood

$1.7B

Copper

$1.1B

Soybeans

Soybean farmers saw exports drop by 80 percent. Almost 1 billion bushels of unsold soybeans are sitting in storage, a near record. That glut of beans and accompanying lower prices are expected to persist into 2020, according to government forecasts. The Trump administration is floating a proposal for $15 billion in payments to farmers to help cover trade war-related losses, on top of the $12 billion in such payments last year.

Although soybeans, the country’s largest farm export, are grown widely across rural America, the effects of the trade war may be most keenly felt in the upper Midwest. In recent years increasing exports to China have driven expansion of crop acreage, and a year ago, the harvest moved in trains of more than a hundred soybean-filled cars to China-bound ships near Portland and Seattle. “The farmers in those areas are taking more of a financial hit,” said Michael Steenhoek, executive director of the Soy Transportation Coalition.

Vehicles

The $1.9 billion drop in vehicle sales to China made just a 4 percent dent in overall U.S. exports of cars and trucks. The United States has threatened additional auto tariffs but they would be months away from taking effect, leaving time for trade disputes to be resolved.


The BMW X4 is assembled in Spartanburg, S.C., in 2014. (Chris Keane/Reuters)

So in South Carolina, one of the country’s top auto exporters, S.C. Ports Authority CEO James Newsome speaks of watchfulness rather than worry. A recent 30 percent drop in auto exports was not wholly due to tariffs, and it was offset by more exports of car parts. Newsome said BMW is making more cars than ever in the state, where it’s invested $9 billion.

But Newsome added that the world trade environment could change over time. “The automotive industry is probably the most global sourcing industry of all,” said Newsome. He added, “You can make a 60,000-dollar car anywhere and ship it probably for a thousand dollars.”

Wood

Wood exports to China dropped by $700 million, or 42 percent. Industries affected included firms that buy logs of hardwoods like walnut, maple and cherry and turn them into boards for furniture and flooring. Before the tariffs, about 1 in 4 of these boards went to China, said Michael Snow, executive director of the American Hardwood Export Council.

Snow said his industry is looking for alternative markets. “But at the end of the day, there really are no other markets out there that can absorb anywhere near the volume that China was taking in,” Snow said. He added, “If this continues for several months, I think there’s no question that we’ll see mill closures and layoffs in the industry.”

Some of the smaller targets of China’s retaliatory tariffs also lost a significant share of their export sales.

Falling exports across industries

targeted by Chinese tariffs last year

Exports to China for select industries for Oct. 2017 to Mar. 2018, prior to tariffs and Oct. 2018 to Mar. 2019, after tariffs were implemented

After tariffs

Before tariffs

Aluminum

$794M

Cotton

$695M

Seafood

$579M

Iron & steel

$463M

Dairy

$198M

Tobacco

$129M

Falling exports across industries targeted by Chinese

tariffs last year

Falling exports across industries targeted by

Chinese tariffs last year

Exports to China for select industries for Oct. 2017 to Mar. 2018, prior to tariffs and Oct. 2018 to Mar. 2019, after tariffs were implemented

Exports to China for select industries for Oct. 2017 to Mar. 2018,

prior to tariffs and Oct. 2018 to Mar. 2019, after tariffs

were implemented

After tariffs

Before tariffs

Aluminum $794M

Cotton $695M

Seafood $579M

Iron & steel $463M

$414M Aluminum

$407M Seafood

$336M Cotton

Dairy $198M

$147M Iron & steel

Tobacco $129M

$98M Dairy

$69k Tobacco

Falling exports across industries targeted by

Chinese tariffs last year

Exports to China for select industries for Oct. 2017 to Mar. 2018,

prior to tariffs and Oct. 2018 to Mar. 2019, after tariffs

were implemented

After tariffs

Before tariffs

Aluminum $794M

Cotton $695M

Seafood $579M

Iron & steel $463M

Dairy $198M

Tobacco $129M

Falling exports across

industries targeted by

Chinese tariffs last year

Exports to China for select industries for

Oct. 2017 to Mar. 2018, prior to tariffs and

Oct. 2018 to Mar. 2019, after tariffs were

implemented

After tariffs

Before tariffs

Aluminum

$794M

Cotton

$695M

Seafood

$579M

Iron &

steel

$463M

Dairy

$198M

Tobacco

$129M

Seafood

The lobsters pulled from the water in Maine are the same as those harvested further up the coast in Canada. But lobster sold from Canada to China faces just a 7 percent tariff, while tariffs on those sold from the United States now total 32 percent.

That difference is punishing the small Maine companies that market live lobsters, said Annie Tselikis, executive director of the Maine Lobster Dealers’ Association. These companies, which typically employ 50 to 200 workers, are also hampered by higher tariffs from the European Union, because Canada has negotiated an E.U. trade deal while U.S. negotiations have stalled.

“So we have already felt what trade disparity means to our industry,” Tselikis said. “To be going through this again with China is very frustrating for our businesses. This industry is incredibly important to the Maine economy. … Our fear is that this does eventually catch up with everybody, whether you’re a commercial fisherman or a truck sales company in Ellsworth, or you’re a fuel distributor. This is going to impact our economy.”

Dairy

A year ago, dairy farmers and manufacturers profited from China’s growing appetite for their products. That included whey, fed to piglets that in turn feed China’s growing demand for pork, as well as mozzarella to top the pizzas sold in China by American food chains. But dairy exports have dropped by half since last year, to about $100 million.


Cows at Raber Dairy Farms in Louisville, Ohio. (Julie Vennitti/Canton Repository/AP)

“The impact, that significant negative impact, has already happened,” said Jaime Castaneda, senior vice president at the U.S. Dairy Export Council.

The latest escalation began last week when Trump moved to increase taxes on $200 billion worth of Chinese goods. China answered by increasing even further the tariffs placed last summer on $60 billion in U.S. goods. This led Trump to start the process of implementing import tariffs on an additional $300 billion of goods.

That expanded import list would target almost every Chinese-made consumer product sold in the United States. While concern over tariffs is ratcheting up in the president’s own party, the trade war shows little sign of relenting with Trump considering it an asset for his 2020 campaign.

The impact of the tariffs imposed last year provides clues about how additional tariffs could affect the U.S. economy and attitudes. Higher tariffs from China would probably stifle exports. Additional tariffs on goods entering the United States, like those imposed last year on aluminum and washing machines, would probably push up domestic prices.

Supporters of Trump’s trade policy say that economic discomfort arising from China’s tariffs will be worthwhile when issues such as forced technology transfer are resolved in favor of the United States. But that can be little comfort to those whose declining trade is unrelated to those issues.

“It’s been a very frustrating time,” said Tselikis of the Maine Lobster Dealers’ Association, “and especially with regard to China. I mean, the lobster industry just feels like it’s collateral damage in a trade situation that’s really focused on intellectual property.”

About this story: The Washington Post used trade estimates from the U.S. Census Bureau to explore import and export trends before and after the onset of major tariff expansions in mid 2018. This analysis compared the value of goods traded between October 2018 and March 2019 with trade values from the same months a year earlier. These estimates are as of May 10, 2019.

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